This Labor Day, your wages aren't going as far

Your wages are working harderInflation takes more from pay that's rising little

Published 5:30 am, Monday, September 1, 2008

This Labor Day, Americans are feeling a triple whammy.

Nationwide prices for groceries, gasoline, electricity and other items shot up 5.6 percent over the past year, the highest annual inflation rate since 1991. At the same time, paychecks aren't keeping up.

Real weekly wages, adjusted for inflation, were down 3.1 percent from a year earlier in July, the latest month stats are available.

The nationwide decline started in October when workers' wages stopped keeping up with inflation, said Cheryl Abbot, regional economist with the U.S. Bureau of Labor Statistics in Dallas. And they've been negative every month since.

That's because of two factors: First, companies are cutting the number of hours their employees are working. In July, workers toiled 0.3 percent fewer hours than they did a month earlier.

At the same time, raises aren't as good.

In July, employees received average annual raises of 3.4 percent, according to the BLS, compared with a year earlier when the average was 4.1 percent.

But because of the weak economy, workers don't feel as if they can ask for more, said Jared Bernstein, senior economist for the Economic Policy Institute in Washington and author of the new book Crunch: Why do I Feel So Squeezed?

And people's ability to tap excess cash from their largest assets — their homes — is no longer an option for many, he said. Not only has the price of real estate fallen, it's difficult to get approved for a loan.

"Working people are getting hit from three sides now," said Bernstein.

A gallon of milk or gas?

It's all so expensive, said the 36-year-old accountant, who works for an oil drilling company. She especially notices how much milk has shot up.

"My son goes through a gallon every two or three days," said Robertson, whose child is 7. "That's like keeping up with the price of gas."

Frank Triola, chef and owner of Azzarelli's restaurant, said he usually gives his 32 employees a raise each year. But this year?

"There is no way this year," said Triola, who owns a restaurant in Katy and is opening another this fall at Interstate 10 and Barker Cypress. "Not with the way it's going right now."

Like many restaurateurs, Triola said his customer traffic has been hurt by high gasoline prices and high food prices. People are staying at home instead of going out, and his own kitchen costs have climbed.

Typically, traffic slows down about 25 percent during the summer anyway, he said. But in July, Triola said his business was off by 50 percent. In August, it was down 45 percent.

While the increase in the minimum wage to $6.55 per hour effective July 24 didn't affect him — he already pays above that level — Triola said he's trying to hold the line on his expenses, including his payroll costs. "You have to cut somewhere," he said.

As rising costs have hit her Houston public relations business, Laura Pennino is doing what she can to reduce expenses. She is trying to entertain clients more at breakfast and lunch rather than dinner, she's using her frequent flier miles for business travel and she scaled back merit raises this year at Pennino and Partners.

Mercer, the human resources consulting firm, recently published its annual compensation survey and found that employers nationwide are planning to dole out slightly lower raises next year as they're been hammered by economic pressures.

Raises will average 3.7 percent in 2009, compared with 3.8 percent this year, according to the survey, which tallied responses from more than 1,000 employers across the nation who have more than 12 million workers on their payrolls.

Some folks, however, would be thrilled at any bump at all.

Houstonian Mike Mapps, who works in information technology for a bank, said he hasn't had a raise in two years because wages were frozen for his department.

To keep his own costs under control, Mapps stopped driving downtown to work. He's taking the bus now, which means fewer fill-ups.

"I try to make do with what I have," he said.

Bright side in Houston

Despite some tough pockets, the Mercer survey had good news for Houston: The oil and gas exploration and production industry will be the most generous, planning to issue raises averaging 5 percent next year.

With so much of the local economy dominated by energy, Houstonians can expect higher-than-average wages, said Erin Packwood, leader of the compensation consulting practice for Mercer in Houston.

"Essentially every employer in Houston is competing for those same people," said Packwood, referring to the health-care firms and real-estate firms that are hiring accountants, administrative assistants and others from the same applicant pool as the energy companies.

"They've had to step up to the plate just to be able to compete for scarce talent in the growing Houston market," said Packwood, who puts the average Houston wage raise for 2009 at something closer to 4.5 percent. And for the high-demand technical jobs in energy such as engineers, geologists and geophysicists? They'll get raises closer to 6 to 8 percent, she estimated.

"My sense is that the squeeze in Houston isn't as bad," said Packwood. However, she also knows that energy is a cyclical industry and its fortunes could suddenly reverse.